Moody’s Investors Service on Friday downgrades the outlook on four out of the eight Adani Group companies it rates to negative from stable, in a move that could have short-term implications for the embattled group’s fundraising ability.
The rating company also retained the outlook for the other four companies and affirmed the ratings for all eight, as the fallout from US short-seller Hindenburg Research’s allegations of fraud continues to lash the ports to energy and edible oils firm.
“These rating actions follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the group,” Moody’s said in a statement.
Adani Green Energy, Adani Green Energy Restricted Group 1, Adani Transmission Step-One, and Adani Electricity Mumbai are the four companies which have suffered an outlook change to “negative” from “stable”.
“The changes in the outlook of Adani companies would make it difficult for them to raise money overseas. Even lenders who would be willing to lend them would do so at a higher rate than what the group has got in the past. This might slow down its expansion spree,” said an analyst on the condition of anonymity.
“Bond yields have risen by 5-10 bps across segments for all issuers after the latest RBI policy; so, I don’t think anybody would tap the market immediately unless it’s imperative,” said Lakshmi Iyer, chief executive of investment advisory business, at Kotak Investment Advisors. “Most of the group’s funding is through banks, with mutual funds having limited exposure to their debt; so, the rating action, for now, will have limited impact.”
Since Wednesday’s 25 bps rate hike, the benchmark 10-year government bond yield has risen 8 bps to 7.36%. One basis point is one-hundredth of a percentage point.
Moody’s added that Adani Ports and Special Economic Zone, Adani International Container Terminal, Adani Green Energy Restricted Group 2, and Adani Transmission Restricted Group 1 are four Adani group companies whose outlook has remained stable.
On Friday, Adani group stocks extended their shareholder wealth erosion by ₹32,774.5 crore in response to a change in the free float designations by global index provider MSCI and a Reuters report that Sebi was probing Adani Group links to anchor investors in Adani Enterprises’ ₹20,000 crore share sale, which was called off.
The 10 listed stocks of the group have seen investor wealth halve to ₹9.69 trillion as of 10 February since the Hindenburg report surfaced on 24 January. Adani group has termed the activist short-seller’s allegations “discredited” and “baseless”.
On Friday, Financial Times reported that the group had hired US law firm Wachtell to fight Hindenburg’s claims.
Friday’s losses were led by the group flagship Adani Enterprises, which fell 4.15% to ₹1,847.35. Also, Adani Total Gas and Adani Transmission, both of which remained locked at the 5% lower circuit, and ACC, which fell 1.71% in response to their free float designation changes, effectively reduced the weighting of these four companies in the MSCI indices.
The weighting changes could spark a total of $428 million (around ₹3,500 crore) worth of foreign fund outflows, according to a note by Nuvama Alternative & Quantitative Research which Mint has seen. The changes would take effect from 28 February.
“While there’s some relief that MSCI didn’t exclude any Adani Group stock from its global indexes, the weight changes will have a sentimentally negative impact on them for some time,” said Sudip Bandyopadhyay, chairman of Inditrade Capital.
Asked whether Indian exchanges could review the floats on their indices after the MSCI action, Bandyopadhyay said: “I don’t think they will suo moto consider anything until after the Sebi investigation.” A Sebi official was not immediately available for comment, while a query to Adani Group seeking their comment remained unanswered until press time.
Shayan Ghosh contributed to the story.
Catch all the Business News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess